The Future of Movies: George Lucas was Dead Wrong

Two and a half years ago, George Lucas made startling predictions about the future of movies. Speaking at the USC film school, his alma mater, he said that the age of the blockbuster was over; that “the secret to the future” was a large quantity of small, web-distributed movies; and that the habit of moviegoing would be a thing of the past. Lucas couldn’t have been more wrong.

Hollywood, like every other sector, gorged itself on the fruits of the age of excess and will now have to start tightening its belt. But a thinner, svelter Hollywood may end up attracting more people. Not to rub it in Lucas’s face, but here are some alternate prophecies:

• Fewer middle-range movies

For years, Hollywood was caught in a bubble of its own and was pumping out too many movies. David Shaheen, managing director for the entertainment industry group of JP Morgan, a firm that’s been heavily involved in film financing since the silent era, explains: “There was so much money coming into Hollywood that [people] just produced more films than they should have. And when you are producing that many films it prices up the talent, it prices up the marketing expenses, it prices up a lot of things, because you just have so much competition for limited resources.” Now that the bubble’s popped, Shaheen says, it’s harder for the studios to get as much of the capital as they’ve been getting over the past five years. So, I don’t know that that necessarily translates into fewer blockbusters, but it does translate into fewer films.” The types of films most likely to drop off studios’ slates are the so-called "tweeners"—movies budgeted between $25-30 million and $100 million; neither low-cost indies with sleeper potential nor tentpoles with reliable fanbases—which represent the highest risk for investors, who sometimes refer to that middle-range as the "valley of death."

• People will keep investing in movies

Investing in films typically ranks up there with buying art and second homes as the final items on the checklist of frivolous ways to spend one’s disposable income during flush times. And usually, those items are also the first to be cut out when the cycle reverses. But whereas the art market is tanking (not to mention real estate), films have turned out to be a comparatively stable investment, based on rising theater attendance. Returns may not be soaring, but at least they’re not negative, and that’s saying a lot.

• DVD sales will plummet

During the age of excess, reliably high DVD sales propped up the entire industry. But now that consumers have that extra second to think before throwing The House Bunny into the shopping cart, they may just rent it or watch it on demand. The resulting drop in DVD sales means studios won’t have nearly as plush a cushion to fall back on, which is another reason they’ll have to be more selective in the films they greenlight.

• The end of slate financing

One of the more popular methods of film financing over the last few years has been to invest in a studio’s slate of films—for a share of its profits—rather than in any particular movie. This era is over as well. Says Shaheen, “That kind of money is basically gone today. Whether it’s senior bank lenders that won’t do it, or the mezzanine and equity investors won’t do it, it’s just not generally available anymore.”

• More frequent record-setting opening weekends

With theater attendance rising, and fewer, more selectively produced movies in the multiplexes, box-office records are bound to be broken. (Especially if Digital 3-D catches on and further differentiates the theater experience.) However, higher box-office returns are better for theaters than they are for studios, as they won’t necessarily be enough to offset the drop in DVD sales.

Perhaps NostraLucas’s prophecies will come to pass somewhere down the road, when the recession is a distant memory. But based on the current outlook, Lucas was about as wrong about the future of moviegoing as he was about the cinematic potential of Howard the Duck.